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tv   Lunch Money  Bloomberg  December 4, 2013 9:00pm-10:01pm EST

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>> welcome to "lunch money" where we tied together the best stories and video in business news. i'm adam johnson. opec is holding steady and the banks are taking a bad cartel slap on the wrist. the wildcard, aviation nation. you've got to write -- fight for your right to keep your miles. and in the city, the smog solution. you actually have a building that eats pollution for lunch. and move over. someone else is coming into boston. the fans are not happy. but kick it off with the tale of two cartels.
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using the word cartel often conjures images of colombian drug warts and machine guns. -- drug lords and machine guns. merriam-webster defines a cartel as "a group of businesses that agree to fix prices so they will all make more money." that sounds illegal to me. and that is exactly why the hammer was dropped on six banks. deutsche bank, royal bank of scotland, jpmorgan citigroup -- jp morgan, citigroup, and rbs. these are rates that banks charge each other tomorrow. >> what is shocking about the scandals is not just the manipulation of benchmarks, though it a serious infringement, but also cartels between a number of financial players. we want to send a clear message that the commission is determined to sanction these cartels in the financial sectors .
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enforcing competition rules will help ensure that financial markets truly work at the service of the real economy and not just the few. but it's not over yet. -- >> it's not over yet. other banks are actually holding out for something better. i cap actually withdrew from the libor settlement. it's not just libor. there are plenty of investigations of benchmark rate, foreign exchange, gold, oil -- take your pick. if it's a market, they might be playing with it. and speaking of oil, that brings us to cartel number two. this one is not illegal. more like an internationally accepted one. of course, we are talking about opec. 12 members and at least eight of them showed up at a meeting this week in vienna. they meet twice a year to decide how much crude to pump out.
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today, the ministers decided to keep the crude output target unchanged. the maya -- kumbyh? not exactly. >> you have all these countries like iraq, libya, and iran saying we will export all this oil out into the world. he is like, that is not going to happen. there are so many issues preventing that supply coming across. there will be a day of reckoning for saudi arabia windows barrels, line. it is not there yet. >> iran getting ready to pump back into the market now that the international community is lifting sanctions in exchange for curbing the nuclear program. iran used to be opec's second produces -- second-biggest producing country. now the minister is shopping around. >> [indiscernible] even bp, exxon, conoco phillips. i'm talking with some of them.
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>> they are an ocean apart, certainly politically. they occupy opposing sides of the searing conflict just for starters. what does the saudi oil minister think of iran's crude plans? >> that is not a good preoccupation. they are very welcome. everybody is very welcome to put into the market what they can. the market is big. it has many variables. one brings in and another takes out. >> wait a minute, opec has an output of 30 million barrels a day and it is that there. then one country has to boost --
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decides to boost production. another country has to cut back production, doesn't? the question is, who will blink? >> $84 is how much saudi arabia needs oil to be to make money. compare that to iran, which is $126. there in lies saudi arabia's power, no matter what the cartel actually does. >> and don't forget about the surge in u.s. shale oil. that affects the price of oil as well. the push for energy independence. do you want a cartel in charge of your energy future? smog problems from china to mexico city. later this hour, we will show you the building that eats pollution for lunch. at first, there's trouble above the clouds. and it has to do with the most precious asset of all for business travelers. give me back my miles. that is next. and as we had to break, the spacex first commercial satellite launched late yesterday, finally. three earlier attempts were canceled due to technical issues.
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a communication satellite will be placed into orbit at a fixed point above the oars. -- above the earth. ?
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>> this is "lunch money" on bloomberg television, streaming live on, your tablet and your smart phone. i'm adam johnson. it might be the coolest company you've never actually heard of. it creates the avionics behind pilot systems, autopilot, and drones will stop if it flies, it -- the chances are that rockwell is behind it. >> if you are flying on a 737, you will see a modern, new cockpit with a large amount of glass with additional capability. both head up and head down displays.
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>> what is it that is so revolutionary? >> the head up display allows the pilot to keep his head up and he can look through that display. it provides him a great level of situational awareness. so he's not looking down in the cockpit and having to look up to get situational awareness. he is keeping his head out of the cockpit, which is where he wants to have his eyes looking. >> and by the way, look at that. that is me in the dreamliner. it is all the pilots could talk about. and something else to talk about this week, using drones to drop packages off at this -- at your house. how plausible is this? >> we found through afghanistan and iraq that the utility of drones is really valuable. and i think there are commercial applications. we have some regulatory and policy issues to make sure they are operated safely. and we are working with nasa and the faa to make sure we find the
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right systems to make sure that when the drones deliver these packages, they do so in a safe manner. >> how big could these businesses before rockwell collins? >> i think they are very large. it's not if, but when. when drones will be allowed to fly in commercial airspace is the question. >> it is more about regulatory than the technology. >> that is correct. the technology is here today to fly these -- what we call unmanned platforms -- in a fairly precise way. >> government is about 52% of rockwell collins business. coming up, the fight over frequent flyer miles is next. plus, are you ready? we are going to go to america's quietest town. [whispering] it is really quiet. ?
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>> in wild card today, aviation nation. there is so much happening in the world of flight. you have new jet makers trying to solve battery problems and other issues with machinery. the faa is weighing whether you can use smartphones during takeoff. we will start with a story that hits closer to home for business travelers, franca, all over the world. it is a case before the supreme court and it is about one man and his miles. >> rabbi binion ginsberg, a lecturer who travelers a lot. he was a member of the northwest airlines frequent flyer program. he had elite status and flew some 75 times a year and northwest kick him out of the program, which it says in its terms it has the discretion to do. the airline said he just complained too much. he complained about late luggage, lost luggage, delays will stop he complained 24 times in seven months. and he did get thousands of
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dollars in travel vouchers, bonus miles, cash for a lost bag , until the airline decided he was abusing the system and they cut him off and said he could never sign up again. he sued for $5 million. ginsburg claims they violated a covenant of good faith under minnesota law. a court of appeals agreed with him. >> first, you are probably thinking, why is the highest court in the land taking up a fight over frequent flyer miles? seriously. as it turns out, it is bigger than it sounds. it is states rights versus federal jurisdiction, precedents set within jurisdictions and what companies can and cannot offer as rewards. >> i do believe airlines should have the ability to punish customers who abuse them. there are clear rules whose -- that state how you should behave with the frequent flyer program. one passenger took the mile simply because he had too many.
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i know many people with many more millions who are just fine. the airline is not just going out and deleting accounts. i do believe that he was abusive, probably. but the airline should not be able to hide behind the deregulation act and that consumers have no say whatsoever. >> which consumer is more profitable for the airline, the one who uses the point constantly or the one with the sapphire status? >> was passengers can be tractable. -- both passengers can be profitable. they cannot just go in and take away those benefits and miles. but when you board up miles and do not use them, it at -- when you board miles and do not use them, it adds to the airline. the more valuable they become, the more money the airlines make selling them to credit card companies and so on. >> how important are these programs to the airlines and their bottom line? >> these loyalty programs make billions for the airlines. d got healed out because of pre- purchasing -- delta airlines got
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bailed out because of pre- purchasing programs. these programs are huge money makers. >> when i look at the miles racket, and i do think it is a racket. full disclosure, folks. i have never used my miles. i give them away. the airlines are packed. does that mean i have less choice than someone with frequent flyer miles? >> exactly, there are billions of miles being minted every year by the credit card companies and not more flights to redeem them. it is becoming harder to redeem them, but more ways also with rental cars and hotels. >> which airline has the worst program? >> you know, i think spirit has the worst program, simply because they're miles expire after a couple of months. it is ridiculous.
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i think delta airlines is leading the pack. they are devaluing the -- they are -- >> when you dissect which plans work best for whom, do airlines like you or do they hate you? >> i educate their customers on how to get the most out of those miles and points. airlines are getting paid billions by credit card companies. the more we can educate people and that they are not loot -- not useless and you should pay attention to loyalty, it can be a win-win for everyone. >> very quickly, are the charge cards that the airlines have, are they a fair deal? >> for certain people, they can be a great deal. in general, if you're looking for a bang for your points, i would look at a card that lets you transfer to a number of different airlines. if one airline does not have the flight you want, you want to be able to transfer to different
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options. there are a lot of cards out there. that is what i would recommend. >> also, which carrier has the best frequent flyer plan? scarlet fu crunch the numbers from a survey about seat availability. >> southwest and jetblue come out on top. they have rewards for 100% of the requests made. jetblue comes close, 89%. united is high as well. american, about 50%. it has absorbed u.s. airways now that it has merged. " comes in at 36.4%. -- and delta airlines comes in at 36.4%. >> and on the issue of not using your smartphone or tablet on takeoff and landing, life is so hard. now they can stay on if the airplane stays in airplane mode. >> next week, the federal communications commission plans to take up an initial proposal to allow cell phone use. they will start by getting public comment. it is not clear how quickly this will go into effect, but the
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technology does allow this, and they say they will at least explore it. >> and of course, this is that the discretion of the airlines, whether they will actually allow it even if the sec does -- the fcc does. do we have a sense whether the airlines will give the thumbs-up and allow it? >> that is the big question. delta airlines has already said they are leaning against it. and frankly, the technology of this is fairly simple these days. the bigger question is the politics of it and the pushback. already, the flight attendants unions have said they adamantly oppose this.
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we have a number of lawmakers who have weighed in and said they don't think it is appropriate. the battle over this will be over whether as the head of the fcc said the other day, whether you want to have somebody yapping next to you in the seat airing your flight. >> if that is the case, then who is in support of allowing cell phone usage on airplanes? >> i think some passengers would like to have that. i could see a compromise solution where you have the shuttle between washington and new york, boston and new york, a flight inhabited mostly by men and women doing business, you might think it is appropriate to use a cell phone on that. whereas on a long-distance flight to europe overnight they
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may ban them there. people want to stay connected, no doubt about it. >> who ultimately makes a decision? is it just the fcc's call in the end? and how quickly could we see this process move? it sounds like it could take a while. >> yes. they would have to do a rulemaking. it could stretch months, possibly even years. there was an attempt to do this almost in a decade ago and after a couple of years of back and forth and public comment, the fcc dropped it. it may not happen anytime soon. and frankly, even if they approve it, then the airlines would have to adopt it. and a lot of them may hold back and not do that as well. the timing is unclear. >> investors have avoided airlines for years. they are always facing pressures from high-cost light jet fuel, competition from other carriers, disputes with pilots unions, take your pick. but some are buying in with good reason.
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just delta airlines is up 130% this year. that works. trading stocks for pinstripes. it's true. and it did not come cheap. front row seats for a billy joel concert, piano man. he's coming to town. ?
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hour, which means bloomberg television is on the market. i'm alix steel. today's moving pictures now with the video as the story. police in thailand have opened the gates, allowing the protesters to enter in an effort to avoid a clash. demonstrators will suspend protest tomorrow to honor the birthday of thailand's king, but they vowed to resume rallies the following day. vice president joe biden met with china's president in beijing earlier today. the meeting was over china's new defense zone that is owned over him and that both japan and china claim to own. biden did not comment on the islands after the first meeting,
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but said that the chinese leader was candid and constructive. the two are set to meet later today. and a hong kong, look at pollution set to -- at toxic levels. an aging fleet of diesel buses and trucks combined with sunny, dry weather has caused pollution to spike in recent days in the city. speaking of smog, here is a building that eats it. in mexico city, this building can effectively consume the amount of smog produced by 1000 cars per day. it is how a city that was once the world's most polluted is cleaning itself up. ?
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>> in the city, online retail giant that post move from its headquarters to the center of town. it actually enjoyed something of a renaissance, creating a whole new community in the process. bloomberg checked it out. >> las vegas, always the town where fortunes are won and lost,
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but few are actually made here. >> to hear that we are moving to vegas is shocking to many people. they are like, why? >> he spent his childhood here. back then in downtown vegas, there was a lot more sin around than there was city. >> it was run down by prostitutes. it was a place that you knew was the wrong side of the tracks. >> he is coming home from california to expand his online menswear company. they are preparing to fly the nest for the first time. thanks to his funding, the company's ceo is tied to vegas for the long-term. >> it is to invest in companies not only that want to be based around vegas, but he involved in the community from the ground
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up. >> it is the brainchild of these that post founder --zappos founder. there is a high price tag for rejuvenating the dell updated downtown, $350 million. many -- the dilapidated downtown, 350 million dollars. but many are buying into it. quickly he understands what it takes to make a city. >> -- >> he understands what it means to make a city. >> that means turning and see lots into shared office spaces. -- empty lots into shared office spaces. >> i think he inherently creates some of the values and the culture, and it is part of shaping and defining what this place will be. >> thomas knoll is taking some of the money to shape his company. he says some advantages of starting up in vegas is obvious. >> the cost of living is
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probably one third of what it is in san francisco. >> and subsequently, more and more tech types from silicon valley are making their home here. >> the thing that is growing so quickly is how we do that in building a strong culture. >> they are working to diversify the local economy be and casinos. his big that on vegas may very well pay out. >> do you ever get tired of hearing people shouting into cell phones? one town had enough. it is called america's quietest town. phil mattingly takes us there. >> over 326 million wireless subscribers blanket the united states with cell phone noise. there is at least one oasis, though. green bank, west virginia. it's 143 residents live in a 13,000 square mile area called the national radio quiet zone to protect the research done here
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at the national radio astronomy observatory, the home of the robert c byrd green bank telescope. >> the largest movable telescope in the world, it's reflecting surfaces 2.3 acres. >> it observes the birth and death of stars, the basic sugars, proteins, the building blocks of life that have been discovered by the telescope. >> you are kind of the nsa of science. >> yeah, i guess that's a way of putting it. we are the collection agency for universal radiation. >> why the quiet zone? >> the energy that it normally receives is equivalent to the energy of an by a single snowflake hitting the ground. >> with no white noise on the radio or cell phone use, living in green bank is like traveling back in time. >> your life is a little slower, old-fashioned. >> general store sells everything and if you need to call home, use the payphone.
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it's a couple of miles down the road. and in case you were wondering, it costs $.50 to make a local call these days. >> and ring they have someone to enforce -- and they have someone to enforce the rules around town. most residents comply, but there is some rebellion. >> someone used to have a wi-fi access point set up and the name of it was "s crewyounraoprivateproperty." >> i live in the city and it drives me crazy. >> i said, listen. and everybody looked around and said, i don't hear nothing. and i said, that's what i like about this. >> greenburg, west virginia. >> time for some noise.
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billy joel is getting ready to rock the garden every month of the year. we will explain. and a notre dame coach says he knows when your kid should start playing football. the answer coming up. and how john boehner does the honors with the capitol hill christmas tree. he got some help from a six- year-old, whose father served in iraq. ?
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>> legendary musician billy joel announced a new deal with new york city's madison square garden. darting in january, he will be playing one show per month at msg. how does he feel about? >> i've said it in set it in the
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eighth and i will say it again. -- in 1978 and i will say it again. there is no better venue in the world. it has a reputation and on the nile history that is operable from the moment you step on stage. -- undeniable history that is palpable from the moment you step on stage. >> you got anything else for us? >> i'm getting a lot of credit here -- getting a lot of credit here for how good am supposed to be, but i think a good deal of it is from the audience that comes to the garden. they are a great audience, and if you have a great audience you usually give a better show. sometimes the show is meh. but here, it is mutual. >> he holds the record at madison square garden for the most sold out shows, 12 in 2006. his first four in the new year are already sold out. a new first down line calculator, laser power. we will hear from the ceo of the company behind it. ? >> in sports, we are going to start off with baseball.
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jacoby is trading red sox for pinstripes. a seven-year deal with the
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>> in sports, we are going to start off with baseball. jacoby is trading red sox for pinstripes. a seven-year deal with the yankees. that is according to the outfielder has a .2970 batting average with the red sox. he still has to pass the physical, but he's effectively a yankee. robert kaplan, a harvard business school professor, offered this perspective. >> we talked off camera with general managers of sports teams. they have all the normal challenges that business leaders have. they are in a very unusual kind of business. i think, for the inky, jacoby ellsbury basically takes one of
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the starting players for their archrival and brings it to them. it is not one of the -- an accident that they made a move like that. all that matters is wins and losses to the public this year. they have to run a business and it takes all that into account. it is a tough job to be a general manager of a sports team. that is why a philosopher of how you lead is critical. good general managers of sports have a philosophy and they think long-term. but they realize that you've got to have a plan. if you're 2-8 is your football team, you look like a even if you have a strong philosophy. using public companies have to deal a short-term shareholders. -- you think companies that are public have to deal with short- term shareholders. sports teams are even worse. >> and bad calls by the rest. did you see the sunday nights redskins-giants game? here is what is happening -- what happened.
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they were initially told by officials they made a first down. by a long -- after a long passing play that was incomplete, they learned they were short on the previous play, which means that the first down had been a third down. then on what became a fourth down, the redskins turned the ball over and it sealed the giants win. i know, it's complicated. one way this could have been avoided was to more accurately measure the field in the first place. the technology is already on the tv, right? pimm fox spoke with the ceo of the company that is making this thing and reality. >> we have patented technology that is designed to project a laser on the field so that it can be seen by everyone in the stands, the players, and the coaches. and eventually, we hope to be able to replace the chains so that automatically, the referees can see if it is a first down line and it might have avoided the problem it had last night.
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>> why didn't they do this, or is it a long process they have to go through? >> i think it is a long process they have to go through. anytime there is no technology, companies that you are presenting to have to go through their due diligence. we are making sure we have conversations with various entities and we are taking their suggestions. and we are refining our product also. when they are ready, we will be ready. >> viewers are sitting at home watching on tv and they party got the technology, but why don't the rest of the players and the fans at the game have it? >> we are trying to enhance the likability of the game for the 80,000 fans in the stands every week, and for the players and coaches and everybody to be able to see it also. >> are you getting any pushback, or is this being embraced? >> i don't think we are getting pushed back. it is just hesitancy. anytime there is a major change, what the nfl or whoever it is wants to make sure it is being accepted by the fans and the
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players. >> is it already being used in other sports, for example, track and field? >> we used it in sports, in track and field at the ncaa event a few months ago. we used it in the shot put, among bond -- long jump, triple jump, and others. >> how did it work? >> it works great. fans the stadiums were able to see where it was and the athletes they were -- the athletes were able to see what they had to beat. >> there are definitely some opinions. >> you have to teach safe tackling techniques. the game itself can be played where there are not injuries to the point where they become debilitating. but i think you have to teach it properly. i don't think it is a game that needs to be played when you are 5, 6, seven years old. i think you can wait to play this game.
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but it goes back to having proper teaching. i think you can play this game when you start to develop and start to be more physically prepared to play it. i have no problem having my son play the game, but i don't think you need to played when you are five or six or seven years old. you can wait until you are physically developed and you know how to teach the proper techniques to play the game. >> a little bit more about the game while you are playing in college. for example, should the ncaa be compensated be on grant and scholarship structure? >> i think they should be compensated for the actual cost of attendance. i think the student is given a scholarship that also includes the cost of attendance, which brings in transportation, other fees. the ncaa scholarship is only tuition, room and board, and books. these young men, because they cannot work a job even though they are compensated for those expenses, they need to get home, they need the ability to travel
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to and from. i would like to see it increase to the actual cost of attendance, which would add a little bit more to their scholarship, which would allow them some money to pick up incidentals, whether it be clothing or a need to get home because of an emergency. they would have a little bit of money at their disposal for those kinds of situations. but i'm not in favor of a monthly check. but i would like to see some incidentals, so if there is an emergency or a need for clothing, or transportation home for a needy situation, that they could do that. >> did you watch the auburn- alabama game over the weekend? football could be worth 100 thousand dollars if auburn wins the championship. ?
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>> it is 56 past the hour, which means bloomberg television is "on the markets." i'm alix steel. express shares are falling the most since last october after the clothing retailer reported third-quarter earnings that
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>> we saw that play out today. joining me with a look at some the potential applications is michael moore. the worst-case scenario for banks here? >> the worst-case scenario would be a strict rule that defines permissible market making in a narrow way and banks will have to get out of the less liquid trading markets, like stress bets or high yields stop that seems quite unlikely.
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between market making and trading gets a little fuzzy. could be bad for banks. >> were talking about potential losses of $44 billion markets. what is the reality? think that there'll be a andnt amount of disclosure the compliance costs will go up. .aybe not the revenue hit it may not be very big. it will come with more costs. there will be more disclosure and more supervision. it will be a lot more tightly monitored. but may be on more of a case-by- case basis. 44 billion is a huge market.
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>> right. the question is, how is this enforced? we do not know the language and we do not know what they're working with. it seems like a near-impossible task. and get to thete core clients doing business, separating what is facilitating clegg wrote is really difficult and, without people on the ground and costly monitoring, it seems like a very tough thing to enforce. how effective will the enforcement be? digit'saw that up double- will stop what has reflect the the doublee -- in digits. what has reflected the volcker rule?
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>> they do not want to damage that. they will be vague and leave someone will room for the banks to continue to run their business. if they shut down their business, which largely, they have, that will satisfy regulators. will have to see next week. thank you so much michael moore. we appreciate your insight.
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